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Philippines to attract more FDI despite global uncertainties -- BSP

Posted on June 20, 2017

THE CENTRAL BANK expects a fresh high for foreign direct investments (FDI) this year, with strong economic growth prospects and the country’s infrastructure push expected to attract investors to the Philippines despite nagging global uncertainties.

BSP Deputy Governor Diwa C. Guinigundo said strong economic growth should keep foreign firms bullish on the Philippines. Bernard Testa / INTERAKSYON
The Bangko Sentral ng Pilipinas (BSP) projects FDI inflows to hit $8 billion this year, slightly higher than the record $7.93 billion that entered in 2016.

Capital investments are likely to be sustained on the back of a recovery in the manufacturing sector, sustained growth in the services sector and the implementation of public-private partnership (PPP) projects, said Zeno Ronald R. Abenoja, director of the BSP’s economic research department.

FDIs totalled $1.56 billion as of end-March, surging by 16.6% from the $1.337 billion posted in the first quarter of 2016. The increase was fueled by a jump in intercompany borrowings as foreign firms invest more in their local affiliates to support operation and expansion plans, versus declining equity placements.

The Duterte administration is looking to spend P860.7 billion on public infrastructure projects this year, which forms part of a grand P8.4-trillion spending plan until 2022 as part of the government’s “Build, Build, Build” initiative.

BSP Deputy Governor Diwa C. Guinigundo has also pointed out that strong economic growth should keep foreign firms bullish on the Philippines, while noting that improvements among advanced economies will also spur more FDI flows.

“If the global growth continues to be entrenched, we should expect more inflow coming from major investment partners,” Mr. Guinigundo also said in a briefing last Friday.

The United Nations Conference on Trade and Development has said the Philippines is among the world’s preferred investment destinations due to its robust growth story. The Philippine economy expanded by 6.4% in the first quarter, slower than expectations but still among the fastest in Asia, next only to China.

Despite bigger FDI inflows, the Philippines continues to lag behind comparable Southeast Asian countries in terms of stock, as totals pale in comparison to those that go to the likes of Singapore and Vietnam.

At the same time, the central bank kept its forecast of a net outflow in foreign portfolio investments this year, in the face of uncertainties in the global financial markets.

Compared to the FDIs which are relatively more permanent, portfolio flows are more volatile given the ease by which these funds enter and leave the country. The BSP kept its forecast of a $900-million outflow for 2017, a reversal from last year’s $404.43 million.

Mr. Guinigundo said recent US interest rate hikes have been the main “counterweight” to otherwise rosy investment prospects in the Philippines.

Latest available central bank data show hot money posting $544 million in net outflows as of end-May. -- Melissa Luz T. Lopez